INVOLVEMENT OF THE EUROPEAN SYSTEM OF CENTRAL BANKS IN SAFEGUARDING FINANCIAL STABILITY
This paper discusses the development of the role of the European System of Central Banks (ESCB) in safeguarding financial stability. This is extremely important in the circumstances of globalised banking industry and financial market complexity and along the path to a new post-crisis world. The financial crisis forced European policy makers to reshape the institutional architecture of the European Union's (EU) framework of financial sector and market supervision as well as to define responsibilities in macro-prudential policy-making and coordination at the EU level. The European System of Financial Supervision (ESFS) started its activities in 2011. At the same time in 2012, the Council of the EU set out its position on establishing a single supervision mechanism (SSM), conferring supervisory tasks on the European Central Bank (ECB) and modifying the responsibilities of the European Banking Authority (EBA). The EU national central banks (NCBs) play an essential role in the process of safeguarding financial stability, and it will become more complex in the near future. The new institutional architecture is a challenge for NCBs. The analysis of NCBs experience in the ESFS and their involvement in safeguarding financial stability at the national level are a good opportunity for promoting the integrity of the financial system. Following the centralisation of a part of the decision-making process, the effectiveness of the NCBs was questioned.Specific developments in the financial system of each country determine the mode of operation and the place of the NCB in the financial environment. At the same time in the context of financial market globalisation and turbulence, the NCBs are subject to financial risks. The paper pursues the aim to propose solutions for further improvements in safeguarding financial stability as well as the ESCB's operation and policy. In the pursuit of the objectives set, the author has made use of such methods as the statistical analysis of indicators, and the graphic and monographic approach. The author builds her research on the analysis of functions of the ESFS, the ESCB and views of a number of researchers on various aspects of modern central banking and NCB role in the process of safeguarding financial stability. Some differences have been detected for the national system of safeguarding financial stability and the involvement of NCBs in the micro-prudential supervision. The institutional architecture for macro-prudential and micro-prudential supervision becomes more complex and centralised only for the group of EU countries. Therefore there is still room for improving the effectiveness and efficiency of this framework. The findings of the research suggest that there exist inconsistencies between the tasks of the ESFS and the SSM and that the integration process is gaining momentum. The innovative aspect of this paper lies in finding trends for the development of NCBs in the micro-prudential supervision and the SSM and the ESFS.
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